Trade of the Day: Lowe’s Companies, Inc. (NYSE:LOW)

Advertisement

To receive further updates on this Lowe’s Companies, Inc. (NYSE:LOW) trade as well as an alert when it’s time to take profits, sign up for a risk-free trial of SlingShot Trader today

The retail sector corrected lower on Wednesday following a dreadful earnings announcement from Macy’s, Inc. (M) that sent investors running for the hills. Wal-Mart Stores, Inc. (WMT) also saw some downside pressure, as the new lawsuit against Visa Inc (V) shows the company is paying higher fees, which dig into margins, for all purchases made using Visa cards.

We want to have bearish exposure to the retail sector, and Lowe’s Companies, Inc. (LOW) provides a great opportunity for us.The stock has been struggling with resistance just below $80 — a level that was originally established in late November and December 2015 — since the beginning of April, and we don’t think it is going to be able to break above it.

With the current weakness in retail and LOW’s upcoming earnings announcement on May 18, before the market opens, we anticipate the stock is going to break below support at $75, just like it did in January.

‘Buy to open’ the LOW June 75 Puts (LOW160617P00075000) for a maximum price of $2.10.

One nice thing about this trade is we will get the Home Depot Inc (HD) earnings announcement the day before the Lowe’s announcement. This will provide an opportunity to exit this trade before the LOW announcement (avoiding the drop in implied volatility that typically comes after an earnings announcement) if the HD announcement misses expectations and pulls both stocks lower. Home Depot is the bigger, stronger brother in this relationship, and if it’s not beating expectations, chances are Lowe’s won’t either.

You can learn more about identifying price patterns and using them to project how far you think a stock is going to move in our Advanced Technical Analysis Program.

InvestorPlace advisers John Jagerson and S. Wade Hansen, both Chartered Market Technician (CMT) designees, are co-founders of LearningMarkets.com, as well as the co-editors of SlingShot Trader, a trading service designed to help you make options profits by trading the news. Get in on the next SlingShot Trader trade and get 1 free month today by clicking here.


Article printed from InvestorPlace Media, https://investorplace.com/2016/05/trade-day-lowes-companies-inc-nyse-low/.

©2024 InvestorPlace Media, LLC